The US$480 million Uch II power plant expansion in Pakistan was planned to be adjacent to and west of an already existing power plant know as Uch power station. The aim of the project was to increase the capacity of the already existing power plant by an extra 375MW of the combined cycle gas turbine (CCGT). The original Uch power station had a capacity of 572MW.

The Uch Power Station is owned by Uch Power Limited (UPL). The expansion project will be carried out by Uch-II Power and its main sponsors are International Power and Creative Energy Resources (CER). UPL was formed in year 1994 as a limited company and its main sponsors are the same as Uch-II. Uch Power Station started its commercial operation in October 2000.

Background

According to an environmental impact assessment (EIA) developed by the Asian Development Bank (ADB) and Halcrow, “Pakistan, like most developing countries, faces a shortfall of power because of the excess of industrial and residential demand over the existing power-generating capacities.”

It has generally suffered from an electricity deficit, however, by 1997 its supply had been balanced and it was expected that would be enough up to 2009. But as existing peak demand approached 6.6 per cent growth per annum during 2001 to 2007, the supply shortage occurred much earlier than 2009. Brisk pace of economic activity, rising levels of income of people, the double digit growth of large scale manufacturing, higher agricultural production and village electrification programme have all resulted in higher demand of power in Pakistan.

The financial loss due to power shortages became overwhelming for the local economy. By 2001, it was estimated that loss of industrial output due to shortages was PKR250 billion annually (US$2.7 billion), which for a developing economy could be disastrous. According to the EIA, though other options for power supply development were considered, “The ‘no project option’ and ‘alternative site option’ were not considered feasible.”

Financial close

Financial close was reached on 21 January 2011 and Uch II was announced to be completely owned by the company. Uch I was 20 per cent held by Swiss private equity-backed regional power investor CER. The total project cost was estimated at US$480 million, which was funded by debt and equity in a 75:25 ratio. International Power’s equity investment of US$120 million was funded from the company’s liquid resources at the time.

The US$360 million of debt was provided by multilateral and bilateral agencies including the ADB, International Finance Corporation (IFC), Korea EXIM and the Islamic Development Bank (IDB).

The ADB agreed to a loan of US$100 million. The IFC board approved in December 2010 a direct A-loan for the project of US$100 million. The ADB has also agreed to provide a political risk guarantee to the tune of US$50 million.

The remaining financing came from Korea EXIM and the Islamic Development Bank, which is reportedly provided US$90 million through an Islamic finance leasing structure. Korea EXIM is providing US$70 million.

The electricity generated from Uch II will be sold through a 25-year US dollar indexed power purchase agreement with the National Transmission and Despatch Company, which is wholly owned by the Government of Pakistan. Gas will be supplied from the existing gas field under a gas supply agreement with the Oil and Gas Development Company of Pakistan. The Standard Chartered Bank served as financial adviser to the sponsor.

Project description

The Uch II project was agreed to be constructed under an EPC contract with Hyundai Engineering Company and Descon Engineering. It will comprise two GE9E gas turbines and one steam turbine. The plant is expected to be operational in 2013 and will be operated by the existing Uch facility under an Operations and Maintenance agreement.
Uch Power Station owned by UPL is located approximately 600 km north of Karachi and 42 km in the north west of Jacobabad, in the Dera Murad Jamali sub-district of Balochistan province in Pakistan. The plant is located along the main Sukkur – Quetta highway (N65) and Rohri – Quetta railway link.

The project consists of a conventional gas turbine, combined cycle, electricity generating plant with a gross output of about 404MW. The plant configuration is comprised of two nominal 134MW gas turbine generators, two heat recovery steam generators (HRSGs), one 134MW steam turbine generator and associated plant equipment and auxiliary systems. The combustion turbines will normally be fired with a low-Btu gas from the Uch gas field.